DAVIS & SHIRTLIFF

Taking the lead

East Africa is overflowing with potential. From agriculture to mining and tourism to energy, investment opportunities abound. Africa Outlook talks to Alec Davis, CEO of Kenya's Davis & Shirtliff, a firm that has been rapidly expanding its horizons across the region..

Writer Ian Armitage
Project manager Donovan Smith

Despite the fact U.S. President Barrack Obama snubbed Kenya on his recent Africa visit there is no denying that East Africa – with Kenya as its hub – is a region overflowing with potential.

From agriculture to mining to tourism to energy, investment opportunities abound and Kenyan businesses are increasingly benefiting from increased demand for their products and are expanding their horizons across the region.

One such firm is Davis & Shirtliff (D&S), a leading supplier of water and energy related equipment.

D&S is a name familiar to many and it has been rapidly expanding its business in the wider East African region off the back of increasing demand for access to water and electricity.

"More and more of our business has been coming from outside Nairobi, which was our only branch just 20 years ago, and we continue to see a need to penetrate the East and Central African region," says CEO of D&S Alec Davis, who believes the lifting of trade barriers has "aided our regional expansion and made it easier to export products across the neighbouring national borders".

Davis has a strong passion not just for the future of his company, but Africa.

"There is a huge amount of potential," he says. "Kenya had elections earlier on this year and the economy had been flat leading up to it. But now we have had successful elections and the new government is settling in, the growth profile is resuming. Most of our product segments are related to development and infrastructure and so certainly there are huge opportunities in the region. Although Kenya has been a bit flat this year, we have subsidiaries in Rwanda, Uganda, and Zambia and in Tanzania all of which are doing extremely well. We also have a branch in Sudan and a new market we are exploring with enormous potential is Somalia. Also one of the fastest growing segments is the distribution of solar equipment. The ever decreasing cost of solar photovoltaic modules and recent technology advances have really opened that up. Of course us being on the equator, there is no better way to power things than through solar power. There are huge opportunities there as well."

D&S is an ambitious, innovation-led business, focused on several distinctive business sectors.

It is involved in the importation, distribution, servicing and installation of surface and borehole water pumps as well as the supply of water treatment, swimming pool, solar and power products.

The company also has a fabrication workshop where it manufactures and assembles water treatment and swimming pool equipment.
And it has its own Distribution and Supply Centre.

"In late 2010 we purchased an adjacent 3000m2 property, which was formerly the Beta Pharmaceuticals manufacturing site. It was an ideal fit to create a new Distribution and Supply Centre. That gives us huge competitive advantage. We import in bulk into Nairobi by container from all our various suppliers and then we stock and store it. We distribute to the smaller branches the products they need. There is a huge portfolio of products to choose from, with low stocking and distribution costs. When they want something they order it on the system and get it the next day.

"This is an important initiative for the whole group, on which we've spent about $2 million, and will no doubt provide the capacity for considerable future growth."

With subsidiaries in Uganda, Tanzania, Zambia, Rwanda, Ethiopia and a presence in Southern Sudan, D&S has an extensive network that is the envy of many suppliers.

"We distribute high quality equipment from a number of leading manufacturers from Europe, Japan, China and Australia to name a few. Principal suppliers are Grundfos and Pedrollo and the company also offers a wide own brand range under the Dayliff label," Davis says. "We offer our customers a comprehensive and competitive product range with regional availability and technical and service support.

"I call our strategy 'the footprint' strategy," he adds. "We expand our footprint and 'the footprint' I define on one axis as the number of branches we have and on the other axis as the number of products and business segments we are in. Although we have stayed within our core business segments, we have greatly expanded the range of products within them. We are opening branches at a fast rate. We now have 28 branches and we are opening three more in the next two or three months. Our strategy is to reach asmany customers as possible through the branch network and then feed through that branch network as wide a product offering as possible."

Davis joined the family business in the late 70s, taking full control after his father passed away in the early 80s. He is the driving force behind the company, which is continuously evolving and adapting to the changing requirements in the market.

He is excited by the future.

"The middle class is growing rapidly in all African countries and so we have this rise in consumerism. With this has come this drive on value and prices. Consumer spending is driving demand and it is also driving competition.

"The real opportunity – or change, if you like – arose 20 years ago now when Kenya liberalised and the foreign exchange controls were removed. It completely changed the business climate. We saw the opportunity that Nairobi could be the regional business hub and took advantage of it way before most people realised the advantages that Nairobi has."

With a large amount of business in the sectors D&S presently dominates, and an abundance of opportunity on the horizon, the company looks set to further increase its already extensive product range, cementing its market leading position for many years to come.

"What sets us apart? There are three important factors: our philosophy and core values, extensive product portfolio and ever expanding regional footprint," says Davis. "Where do I see the business in five years? We will certainly be much bigger than we are now. We will be in some other markets. We won't be – certainly from my perspective now – in any other business segments. We have enough business segments. But there is so much potential in each of those segments that I can foresee they will be much more independent enterprises, with almost a conglomerate-type strategy where all business units are focused and resourced and independent.

"Is that important in our development? I think so. Really for me the strategy is to have centralised support functions including supply, finance and IT which have high levels of expertise and these are shared with the operational business units which have complete independence. They compete with each other and build their own dedicated resource base to support the product.

"Certainly there is huge potential and there is going to be massive growth in this region in the next 10 years."